Using Technology to Build Inclusive Financial Systems

This focus note surveys the current use of technology to deliver financial services to poor people in developing countries. It assesses whether use of technology can make microfinance profitable to formal financial institutions and if customers will be comfortable using technology. The note finds that financial institutions are using ICTs to deliver financial services to poor people. Banks are able to reach new customers by using ICTs to deliver services through retail outlets. Banks, however, still have to build transaction volumes and find ways to profitably lend in the informal sector. Hence, it is uncertain whether technology channels will make microfinance profitable for banks. The paper states that sustaining innovative channels requires the right policies and adequate financial sector infrastructure in place. It lists the following factors that banks should address to effectively deliver services through ICTs:

• Implementation of supportive regulation;
• Perceived value addition to customers;
• Consumer education;
• Usability of the technology;
• Cultural fit.